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What is Social Security Withholding?

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  • Written By: Grace Ferguson
  • Edited By: C. Wilborn
  • Last Modified Date: 07 November 2016
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In America, Social Security is known as the Old-Age, Survivors, and Disability Insurance (OASDI) program. It is a social insurance program enabled through specific payroll taxes referred to as Federal Insurance Contributions Act (FICA). By law, employers and employees are required to pay taxes to the government. Included in this tax payment is social security withholding.

In basic language, social security provides benefits for retirement, disability, and death. These are the most commonly provided benefits of private sector pension plans. They are also funded by taxes due from the employee and the employer. The employer and the employee are both responsible for their own portion of social security withholding.

An employee’s social security tax is withheld from her paycheck each pay date. The employer is responsible for paying his entire amount of social security taxes due. For each year the employee’s FICA contribution is assessed, she receives credit from the Social Security Administration for those wages for that year.

In addition to social security withholding, FICA has imposed Medicare taxes on the employer and the employee. Consequently, FICA is comprised of Medicare and Social Security. The Medicare program exists primarily to provide retirees with health benefits.

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To fund the Medicare program, the employer and the employee must pay separate payroll taxes. Although the employee’s share of taxes is deducted from his paycheck, the employer is responsible for ensuring this deduction occurs timely and accurately. Therefore, in actuality, the employer pays his and the employees’ share of FICA taxes.

There are a few categories of workers who are exempt from paying Social Security taxes. State or local government workers who are participating in an alternative retirement system implemented by their employer are exempt. So are college students employed under federal work-study programs, postdoctoral researchers, and teaching assistants or research assistants. Individuals in these assistant positions must also be graduate students receiving a stipend while performing these job duties or while on fellowships. Ministers or individuals providing a similar religious service, providing they possess an objection that is morally and religiously inclined toward their disbelief in public insurance, may also be exempt.

An employee’s federal income tax deductions are based on his filing status and the amount of allowances he claims. This flexibility sometimes allows him to control the amount of taxes withheld from his paycheck. Social security withholding cannot be adjusted because the government has imposed a fixed amount; the employer must pay these taxes or be subjected to hefty penalties.

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Discuss this Article

Sinbad
Post 9

I see Social Security withholdings as a positive more than a negative. Maybe it is because I know some disabled people, survivors, and retirees. Everyone is quick to place judgment on others, instead of themselves.

I am sure some people take advantage of our giving-to-the-less-able system, but I hope most people genuinely need this help.

This is like giving to charity, a charity for the less fortunate American people, so people should feel good about contributing, although it is not by choice.

Hopefully there is always money available to the less able people. We should all be given the opportunity to have at least the necessities of life.

starrynight
Post 8

@strawCake - That is very concerning. I don't mind paying into the system. That is, as long as there is some money available for me when I get older.

I feel like after working and paying into the system for many years, once I reach retirement I deserve to actually see some of that money!

strawCake
Post 7

What most people don't realize about social security witholding is that the money goes to pay for the social security payments that are being made now. The government doesn't take that money and put it in a super special account just for you!

One thing that is worrying about this is that when people in my generation (I'm in my twenties) get older, there might not be any money to pay for our social security benefits. I know what the government says we'll get paid now, but there's no guarantee that money will actually be there in the future when it's our turn.

BoniJ
Post 6

Sometimes employees get a little tax break. As of January 2011, the employees part of the Social Security withholding tax was lowered from 6.2 per cent to 4.2 percent. Unfortunately, this is only for 2011. But it will be a help to a good number of people.

I don't know how often this employee tax rate is adjusted. It would be interesting to find out. I don't think too many people look for changes in their Social Security or Medicare withholding taxes.

B707
Post 5

When the Social Security and Medicare systems were set up, I think they made a lot of sense. Contributing to the program every paycheck makes it possible to have some money for illness and living expenses in retirement, especially for those who don't have a pension. People generally have a hard time saving for the distant future.

I would like to know how the government invests any excess funds that aren't paid out each month.

I just hope that we can figure out some way to provide money for future generations during their retirement. We better start devising a plan right now!

bagley79
Post 4

Every year or so I get a letter from social security showing how much I have paid in to the system, and what my monthly benefit will be when I reach certain ages.

I keep a file of this record so I can see if there are any changes from year to year. I know I can also find this social security information online, but have never looked up the website.

Even though I would not want to come up with that lump sum of money when I do my taxes, it is not easy to see how much of my income is deducted from my paycheck every other week.

SarahSon
Post 3

Every time I look at my paycheck stub, it is hard to see how much money goes toward social security retirement. I understand the reasons behind this and know I am supposed to get this back when I retire, but I wonder if I really will.

It seems like the social security program is not very stable and I keep hearing they will be out of funds by a certain date. This really makes me wonder if I will ever see any of the money I have already put in to the program.

I know there are many people who wonder about this, but there really isn't anything you can go about it. I just hope that these government programs that are being funded now be available for those people in the future.

dfoster85
Post 2

@EdRick - I used to have a small side business, so I'm familiar with self-employment tax! (In the US, at least.

The thing that stinks about self-employment is that you have to basically pay both the employer and employee portions of Social Security and Medicare withholdings. That's why the rate is so high (15.3% last time I checked); no one has that much withheld from their paychecks!

The good news is that yes, it does count toward your social security income. It counts toward your eligibility, years worked, etc. I think the withholding limits are basically the same as for regular Social Security withholding - that is, you don't pay the taxes on income over a certain amount - but I'm not positive on this point.

EdRick
Post 1

I was actually in one of those local government programs; I had no social security withholding tax, but instead they took money out for a local pension. I never made more than three thousand dollars the whole time I worked for them, so it was really very little money that I paid into the system. I could have rolled it over, but I didn't have the right kind of retirement account for that to happen, so I just cashed out. (All of two hundred dollars.)

Now I'm self- employed, so I don't have FICA withholding yet again. I do have to pay self-employment tax. Is self-employment tax basically the same thing as FICA? Does it count toward your social security?

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